Flipping a property involves buying a home that needs improvement, making improvements that will positively impact the resale value within a short period of time and then selling it for a profit. As this can be a risky investment strategy, there are many areas to consider in order to turn a healthy profit when flipping a property.
Being able to buy a property for a price that leaves you room to pay for the work needed is essential. It’s also important to know what kind of work will add value to the property, who your ideal buyer is and how much you should budget for the refurbishments in order to get a profitable sale price. If you’ve done your research, flipping a property can allow you to make a lucrative return quickly. However, this investment strategy won’t bring passive income.
How to make the most out of flipping properties
Prior to putting an offer on a property, thoroughly inspect it in order to assess the condition of the property and budget for repairs and renovations needed to be made. This will help you figure out the finances likely to be necessary to complete the project.
Plan the stages of your renovation and create a timeline and budget. And when budgeting, always leave room for unexpected costs. Researching the local market can also help you decide what features will likely add value to the property and work out how much time you need to allow if seeking planning permission.
As challenges could come up along the way, it can be beneficial to have a back-up plan if you exceed your original budget. Instead of taking a loss, you could hold on to the property for longer and rent it out for the time being.
Flipping a house isn’t always as easy as it’s shown on Homes under the Hammer, but if it’s done successfully, you can earn a large return on investment. With this type of property investment, you’re less dependent on the long-term impact of the property market, and you don’t have to deal with tenants, which can be time-consuming.
Ways to add value to a flip property
There are a variety of renovations that can help add considerable value to a property. Many of the ways to do this involve increasing or maximising space. Converting a cellar into living or storage space can add up to 30% to a property’s value, according to Property Price Advice. Splitting a house into separate flats has the potential to increase value by 30%, especially in London and other areas with strong rental demand.
If the property already has outside parking, converting the garage to living space can add value, even up to 15%. Extending a kitchen or creating an open-plan kitchen and living area also has the potential to boost the property’s value. Additionally, loft conversions are popular ways to increase the market value of a flip property investment. An extra bedroom, especially if it has an ensuite bathroom, can add up to 15%.
With any renovations that may need planning permission, such as a garage or loft conversion, check with the local authority and remember that submitting a planning application takes time and money. Overall, it’s important to research what the best improvements are to make for the specific type of property you’re investing in.
Assessing a property’s potential to be flipped
Only certain properties will be suitable for a flip, so it’s important to assess whether it’s viable. Are you able to get the property for an affordable price that leaves you room to do up the home and sell it for a profit? Are there areas of improvement that will add enough value to the property and increase the market value of the home?
To further assess property investment deals, use PropertyMenu’s Deal Calculator and pick your chosen exit strategy, including flip, to help you decide whether a property investment deal you’re considering is the right investment for you.